cost of capital


The opportunity cost of an investment; that is, the rate of return that a company would otherwise be able to earn at the same risk level as the investment that has been selected. For example, when an investor purchases stock in a company, he/she expects to see a return on that investment. Since the individual expects to get back more than his/her initial investment, the cost of capital is equal to this return that the investor receives, or the money that the company misses out on by selling its stock.

Use cost of capital in a sentence

I wondered what the cost of capital would be, because it seemed like it might pose too big of a risk for us.

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You should try and make sure that you know what the cost of capital will be and try to get the most from it.

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The old man finally cashed in his stocks after nearly thirty years, making a profit and a full return of his cost of capital.

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Internal Rate of Return economic value added